AP1, one of the four main buffer funds backing Sweden’s state pension, posted an 11.0% investment return for the first six months of this year, just beating a rival, as its chief executive officer cited the fund’s attitude to risk taking as a key factor behind the result.
In its interim report, the Stockholm-based pension fund announced a return before costs of 11.0%, and 10.9% after costs for January to June.
The figures are slightly higher than the first-half returns reported by fellow buffer fund AP4 last week.
AP1’s total assets increased to SEK431.5bn (€42.2bn) at this year’s halfway point, according to today’s report, compared to a figure of SEK392.6bn at the end of last year.
Kristin Magnusson Bernard, CEO of AP1, said: “The fund’s constructive view of risk-taking was well rewarded financially during the first six months of the year.”
She added that AP1’s portfolio had been well positioned to benefit from the prevailing market situation, and that most asset classes had contributed positively to the return. The pension fund’s large exposure to global and Swedish equities had been the main return driver in the period, she said.
Figures in the interim report show that AP1 has significantly ramped up its equities allocation in the last few years to 55% of the total portfolio at the end of June, up from 49.2% at the end of December 2020 and 36.3% a year before that.
Between January and June, equities produced a 15.4% return for AP1, according to the report, with Swedish equities generating a 19.6% return, those in developed markets giving 13.5%, and emerging markets shares producing a 10.8% return.
Venture capital fund investments also performing strongly, returning 22.8%, the data showed.
AP1’s real estate ended June with a 10.6% year-to-date return, but fixed-income securities – which make up around a quarter of the portfolio – delivered a loss of 2.4%.
Commenting on market conditions in the reporting period, Magnusson Bernard said that although risk-taking has been rewarded financially during the spring, the overall upwards market direction has not been without its hiccups, citing the split in market views over the future inflation trend.
“Valuations in certain market segments have at times seemed potentially exaggerated, but over time market and valuation froth has subsided in a controlled manner,” she said.
As for the rest of this year, the CEO said AP1 aimed “to respond nimbly to changes in market direction while being firmly focused on our long-term mission: To create high returns through exemplary asset management, at low cost”.
In an interview with IPE back in February, Magnusson Bernard, who took over as CEO of the pension fund a year ago, talked in particular about the mindset of AP1’s investment team when it came to taking investment risk.